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The danger of mandate clauses

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The danger of mandate clauses


When authorising an agent to have a mandate to sell a property, the seller must be aware that he needs to disclose fully all issues related to the property.



Interviewed for the "Greeff Outlook" magazine, along with half a dozen other senior Cape real estate agents, Mike Greeff, CEO of Greeff Properties, the Constantia headquartered real estate company, touched on several points which have proved controversial particularly in connection with sole mandates. Greeff said that when authorising an agent to have a mandate to sell a property, the seller must be aware that he needs to disclose fully all issues related to the property.

Most importantly, said Greeff, agents should make absolutely certain whether VAT is payable by the seller.

"It is widely accepted that the price quoted does include VAT unless the document specifically states something to the contrary," he said, "but when this matter has not been cleared up at the outset, it can lead to the cancellation of the sale and even, down the line, to legal action by the purchaser.

"It is absolutely imperative, therefore, to cover the VAT issue early on, either in the mandate document itself or in an addendum to it."

Sellers, warns Greeff, can on occasions 'overlook' obvious defects and faults in the home and developers can be particularly misleading to both the agent and the seller when the property is being sold off plan. In these instances, he says, it is essential for the buyer and the agent to sit down and thrash out what really is on offer, separating what will actually be delivered from what has been promised. The agent should, he said, cover the 'promise list' in an addendum to the development mandate or sale agreement – and with second hand sales, should list all the property's defects in the mandate agreement.

"The message to all buyers and agents when selling developments is, "Do your homework". Find out exactly what will be installed, what retail opportunities are going to utilise the provided commercial space and what else is happening in your precinct. Take great care to put in writing what type of operations will be moving into any retail space in the project. In short, get hard facts, not just sales talk."

A big improvement in the standards to which agents will be operating is likely to come about in the next two or three years, he said, because the new Estate Agents Affairs Board's training and examinations will be comprehensive and will include compulsory practical "on the job" training.

"It is quite clear now that the effect of this training and these examinations will be to eliminate many of the unscrupulous, less hardworking, less educated agents in the business," he said. "That means that the remainder are likely to be even more professional and more effective to deal with."

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Disclaimer: The information presented and opinions expressed herein are those of the authors and do not necessarily represent the views of Estates Report and/or its partners.